Why Young people should Embrace Treasury Bonds and Capital Markets. Pt.2

Understanding the Young Generation's Investment Landscape

Feb 27, 2025

This is the second part of a series aimed at addressing some of the issues raised during the space hosted by the Capital Markets Authority on Last Month. Today, I want to focus on two key points highlighted by two panelists, who emphasized the importance of young people taking on more risks.

They suggested that young investors should not settle for the average returns associated with capital markets but should instead be willing to risk what little they have to achieve greater breakthroughs.

I want to start by acknowledging the inspiring stories shared by Mr. Cashflow, Mr. Muhammad Kakika, and Mr. Livingstone. I respect their journeys and the risks they took to build their successful ventures. Mr. Kakika's story, tracing back to 1990, illustrates how he managed to gather capital for various employment income from South Africa.

Similarly, Mr. Livingstone's journey of starting a cleaning company showcases the risks he undertook to achieve success. We need to hear such stories, as they resonate with many who have faced challenges and emerged victorious.

However, it is essential to recognize that for every success story, there are countless others who have faced setbacks and failures.

But let’s not overlook the reality of the majority of young Ugandans. By the very nature of being Ugandan, we are already exposed to high risks. A medical emergency can strike at any moment, leaving individuals with few options. We live in a high-risk environment where every little income is stretched thin, and the economy poses significant challenges. We are not risk-averse; it is ingrained in our DNA to hustle and survive.

By the very nature of investment principles, we always encourage individuals to invest first for emergencies. What better way for the majority of young Ugandans to prepare for emergencies than by utilizing capital markets, specifically unit trusts and treasury bonds? Let’s start from this point: if we adhere to the investment rule that emphasizes the importance of first investing for emergencies, then we are essentially advocating for investments in treasury bonds and unit trusts. There is no other investment vehicle that allows you to access your money as quickly and easily as these options, which is not the case with real estate.

How much risk do we expect young people to demonstrate? Every day, countless individuals wake up to what can only be described as modern slavery in the Middle East.

Young men and women knowingly venture into harsh working conditions, motivated by the prospect of earning just one million shillings a month. Staying in Uganda has not worked for them, so they take that risk. They might also consider starting a border-border business or opening a kiosk, but we must understand that many are just one catastrophe away from losing everything.

This is not to say that we shouldn’t take risks, but rather to advocate for a moment of reflection. Young people should not risk the little they have, as losing it could mean losing everything. While Mr. Kakiika and Mr. Livingstone speak about taking risks, can they share how many of their peers also started businesses that ultimately failed? For every successful entrepreneur, there are many who have struggled and lost everything.

In the 1990s, the business landscape was different. How many people owned taxis back then compared to now? The cost of starting a boda-boda business today includes taxes, trackers, and other expenses that didn’t exist in the past. The environment has changed, and we must acknowledge that.

This is not to dampen the spirit of entrepreneurship; rather, it is to highlight that Ugandans are inherently entrepreneurial. The statistics show that young people are eager to create opportunities.

However, we must also recognize that many are content with being ordinary, and that is perfectly fine. We can use our ordinary capabilities to build wealth over time, as many have done by investing in smaller plots of land around Kampala.

Ugandans have historically reinvested in real estate because it has been perceived as a risk-free investment. It allows individuals to continue their daily lives while generating some income. This is where treasury bonds, unit trusts, and capital markets come into play.

We are not suggesting that treasury bonds should compete with entrepreneurship. Instead, we encourage young people to invest the little they have in treasury bonds, which can yield around 14% per annum. By allowing that investment to compound over time, they can build wealth that surpasses what land investment might offer.

Every day, we see individuals who bought land and, when faced with emergencies—often medical—they are forced to sell their plots at a loss. A plot purchased for UGX 40 million shillings may only fetch UGX 25 million when sold under pressure. We must do better; we must plan better.

While bonds may not offer the allure of quick riches, they provide a stable return without the risk of losing your capital. How many businesses consistently deliver a 10% profit year after year? It is crucial to understand that while entrepreneurship is valuable, it is not the only path to wealth.

The situations that allowed previous generations to succeed in business are largely gone. Many successful entrepreneurs of the past thrived in an environment where bribes and tax evasion were common. Today, we face a different reality, and not everyone is inclined to pursue that path.

We must embrace the idea that not all of us will be entrepreneurs, but we can all be investors. It is essential to nurture an investment-centric society. If we cannot trust basic investment products like treasury bonds, how can we expect people to invest in more complex financial instruments in the future?

Let us take a step back and understand the society and the new generation we are advising. We are talking about young people earning less than 2,000,000 shillings a month, many of whom are content in their professions. They may not have the time or resources to pursue farming or other entrepreneurial ventures.

For those with an entrepreneurial spirit, they do not need to be reminded of their potential. However, we must also recognize that many young people are simply trying to survive. They are not risk-averse; they are risk-aware. They understand the stakes, and they are making calculated decisions based on their circumstances.

While we encourage young people to take risks, we must also advocate for patience and strategic investment. The ultimate key to building wealth is time. By deploying capital efficiently and allowing it to grow over time, we can achieve financial stability.

Treasury bonds may not offer 100% returns in a year, but they provide a solid foundation for long-term wealth accumulation. Let us guide our fellow young people toward making informed investment choices that will benefit them in the long run.